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Tax Policies for Low-Carbon Technologies

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  • Metcalf, Gilbert E.

Abstract

This paper discusses the difficulties of achieving climate change policy goals with low-carbon subsidies as opposed to using taxes to raise the price of carbon-intensive activities. First, subsidies lower the cost of energy, and thus encourage consumer demand responses that work in opposition to the goal of reducing emissions. Second, it is difficult to achieve technology neutrality with subsidies. Third, many subsidies are inframarginal. Finally, subsidies often suffer from unintended interactions with other policies. The paper concludes with some observations on the use of price-based instruments and discusses how a carbon tax could be designed to achieve environmental goals over a control period.

Suggested Citation

  • Metcalf, Gilbert E., 2009. "Tax Policies for Low-Carbon Technologies," National Tax Journal, National Tax Association;National Tax Journal, vol. 62(3), pages 519-533, September.
    • Handle: RePEc:ntj:journl:v:62:y:2009:i:3:p:519-33
    DOI: 10.17310/ntj.2009.3.10
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    Citations

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    Cited by:

    1. Robert Main, 2013. "Subsidizing Non-Polluting Goods vs. Taxing Polluting Goods for Pollution Reduction," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 41(4), pages 349-362, December.
    2. Aldy, Joseph Edgar, 2011. "A Preliminary Review of the American Recovery and Reinvestment Act’s Clean Energy Package," Scholarly Articles 5688917, Harvard Kennedy School of Government.
    3. Eimear Leahy & Richard Tol, 2012. "Greener homes: an ex-post estimate of the cost of carbon dioxide emission reduction using administrative micro-data from the Republic of Ireland," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 14(3), pages 219-239, July.
    4. Linn, Joshua & McConnell, Virginia, 2019. "Interactions between federal and state policies for reducing vehicle emissions," Energy Policy, Elsevier, vol. 126(C), pages 507-517.
    5. Newell, Richard G. & Pizer, William A. & Raimi, Daniel, 2019. "U.S. federal government subsidies for clean energy: Design choices and implications," Energy Economics, Elsevier, vol. 80(C), pages 831-841.
    6. Kim, Wook & Chattopadhyay, Deb & Park, Jong-bae, 2010. "Impact of carbon cost on wholesale electricity price: A note on price pass-through issues," Energy, Elsevier, vol. 35(8), pages 3441-3448.
    7. Nadia Ameli & Paul Drummond & Alexander Bisaro & Michael Grubb & Hugues Chenet, 2020. "Climate finance and disclosure for institutional investors: why transparency is not enough," Climatic Change, Springer, vol. 160(4), pages 565-589, June.
    8. Mireille Chiroleu-Assouline, 2022. "Rendre acceptable la nécessaire taxation du carbone. Quelles pistes pour la France ?," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 15-53.
    9. Balázs Égert, 2011. "France's Environmental Policies: Internalising Global and Local Externalities," OECD Economics Department Working Papers 859, OECD Publishing.
    10. Johnson, Erik Paul, 2014. "The cost of carbon dioxide abatement from state renewable portfolio standards," Resource and Energy Economics, Elsevier, vol. 36(2), pages 332-350.
    11. Paola D’Orazio & Marco Valente, 2018. "Do Financial Constraints Hamper Environmental Innovation Diffusion? An Agent-Based Approach," SPRU Working Paper Series 2018-10, SPRU - Science Policy Research Unit, University of Sussex Business School.
    12. Schmidt, Tobias S. & Battke, Benedikt & Grosspietsch, David & Hoffmann, Volker H., 2016. "Do deployment policies pick technologies by (not) picking applications?—A simulation of investment decisions in technologies with multiple applications," Research Policy, Elsevier, vol. 45(10), pages 1965-1983.
    13. Christopher S Decker, 2020. "Illustrating the Difference between Emissions Fees and Abatement Subsidies Using Isoquant and Isocost Geometry," Journal of Economics Teaching, Journal of Economics Teaching, vol. 5(1), pages 37-50, May.
    14. Finkelstein Shapiro, Alan & Metcalf, Gilbert E., 2023. "The macroeconomic effects of a carbon tax to meet the U.S. Paris agreement target: The role of firm creation and technology adoption," Journal of Public Economics, Elsevier, vol. 218(C).
    15. Kenneth Gillingham & James H. Stock, 2018. "The Cost of Reducing Greenhouse Gas Emissions," Journal of Economic Perspectives, American Economic Association, vol. 32(4), pages 53-72, Fall.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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